Business Reporter

Australia need to rethink its industry support if it wants to become Asia's foodbowl, a new report says. Photo: Jay Cronan

Australia has to leave behind traditional industries that are going nowhere and get behind agriculture if it wants to tap into Asia's growing demand for food and unlock billions of dollars in exports, a new report says.

Far more of Australia's produce is expected to be exported to Asia over the next 20 years, according to the study. But Australia may have to give up government support for industries such as traditional manufacturing if it wants Asia to reciprocate on agriculture.

The proportion of Australia's agricultural and food exports sold to Asia will increase from around than 40 per cent to between 65 to 75 per cent over that time, with Chinese demand dominating the region, a report by the Economist Intelligence Unit released on Tuesday on the agribusiness sector showed.

Photo: EIU

Government money currently spent supporting industries that were not growing could also be redirected toward measures such as research and development programs for agriculture, the report's authors say.

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"Between 2007 and 2030 real per-capita food consumption is forecast to increase by 79 per cent for developing countries as a group, and to more than double in China and South Asia," the authors of the report, which was supported by chemicals giant DuPont, said as industry leaders meet in Canberra to for a day-long event.

The federal government is set to issue a white paper later this year on developing northern Australia as a potential food basket for the Asian region.

Photo: EIU

At the same time, it is using its role as the chair of the G20 this year to push for a loosening of in the agricultural sector regulations and an opening up of international trade in food.

Australia already exports $40 billion worth of rural products, although the size of the agricultural sector, at about 2.2 per cent of the share of GDP in the last financial year, has been dwarfed by the exponential growth of mining. Mining made up 9.4 per cent of Australia's growth in the 2012-13 financial year.

Trade barriers

Photo: EIU

Much has been made about the expanding wealth of Asia's middle classes and the increasing demand for meat and dairy products, with "milk man" New Zealand already seen to be benefiting from China's growing consumption of milk and other products.

Even so, Asian governments favour trade restrictions to make sure their local produce meets domestic demand and their markets maintain some degree of self-sufficiency.

For Australian farmers to get a better foothold in the regional market, agricultural advocates such as the Australian Farm Institute have called in the government to push for more openness in what is one of the most trade-protected sectors in the world.

"While there are, undoubtedly, trade-offs between domestic considerations and regional trade, Australia should consider the implications of these policies on Australia's chances of securing greater access to agricultural markets via its prospective trade deals," the reports' authors said

"By opening its own markets to foreign manufactures, Australia may create a more positive outlook for the export of its agricultural products."

By removing the subsidies the government gives to non-agricultural sectors that might not exist without such support, such as traditional manufacturing, Australia would have a stronger case at the trade negotiating table with Asian countries, the report's authors said.

"If Australia shows the willingness to reduce some subsidies to certain non-agricultural sectors, that will be a bargaining chip that they can use to open up agricultural markets in Asia, so that could be quite important," senior economist John Ferguson at the Economist Intelligence Unit added.

Apart from trade agreements, supporting foreign investment in Australian farms and agribusinesses would also make Australia a "more attractive food bowl for Asia", the report said.

Takeover battles

The federal government's decision to reject a takeover bid by US grain trader Archer Daniels Midland for GrainCorp in November left a cloud over foreign investment in the agribusiness arena.

At the same time, the three-way battle for Australia's oldest dairy producer, Warrnambool Cheese & Butter, which was ultimately won by Canada's largest milk processor Saputo, had also highlighted the race to tap into growing demand for milk products in Asia.